OECD director: Keep fighting to open markets
Free trade can survive populist backlash, says official, but ensure gains fairly shared
New Zealand needs to keep fighting for open markets and free trade in the face of rising global tensions, says visiting OECD director of trade and agriculture Ken Ash.
“You need to be unapologetic globalists,” Ash says.
Free trade can survive the current populist backlash, Ash says, but there needs to be more done to ensure the benefits are fairly distributed.
“You need to continue to make the case for openness. And for domestic policies that go along with that openness so that more people can benefit from market opportunities.”
As a small country New Zealand punched well above its weight on the international trade stage, he said. “You have to stay the course.” Trade tensions between the US and China have been blamed for a slowdown in global economic activity over the past year.
The OECD says global growth is projected to slow to only 3.2 per cent this year, well below the growth rates of up to 4 per cent seen over the past three decades, or even in 2017-18. “Those are big numbers,” Ash says. There was no doubt the trade war had injected a level of uncertainty into the economic system.
“It’s . . . a much more confrontational approach,” Ash said.
“Markets are tightening, not opening. This is very concerning. It imposes direct costs on businesses”.
But the important point was that, for the most part the dampening
effect on the economy was coming more from the uncertainty than from the trade restrictions that have been imposed, he said. The good news was that this meant it was possible to turn that around.
“If we begin to see more cooperation, more conversation, then this situation could flip quickly,” he said. “Whether it will or won’t, I don’t know. But it is much easier to turn around a conversation than it is to undo restrictions [already in place].”
We saw an example of how fast sentiment could turn last week when a handshake between US President Donald Trump and Chinese President Xi Jinping spurred a global stock market rally.
“The headlines talk a lot about the US and China. But I think the tensions are [wider] than that,” Ash said. “Japan is not happy, Europe is not happy.
“It derives largely from [frustration that] the rules . . . in place are inadequate with respect to certain sectors.”
But the benefits that come from opening markets were demonstrable and the costs of closing them were clear, he said.
“We believe that we are going through a moment that’s difficult but we’re going to come back to the space of opening market,” Ash said.
“But with a difference. [Ensuring] growth is more inclusive and we don’t leave regions and individuals and skill categories a behind.”